Another method for categories, this one a combo of Google Blogsearch and Technorati Tags. Make the tags the keywords in your posts, then hard-code the Google Blogsearch search-string into your sidebar. Looks pretty good to me. LBBP is also (sensibly) starting with a small number of tags & not going technorati tag crazy like some bloggers I could mention... (er, that would be me...) Get the method from Skeptic Rant:

On my sidebar, I have added a tags area with a list of the tags I intend to use. I will add more tags as needed, but I intend to keep the list relatively short.

Each of the tags in the list is linked to a Google Blog search referencing the relevant tag. Because my blog is hosted by Blogger (Google) it is indexed almost immediately when I post. So, clicking on the search link brings up a results page, ordered by date, referencing all of the articles on my blog with those tags. And, since I have just started tagging my entries it also has the advantage of searching older articles for key words in the body of the posts in addition to the tags.

To make posting easier, I have added all of my tags as part of my default formatting template from the Blogger settings. Then, each time I post I just delete the tags I don't need.

So I'm guessing the tags are added in the post template as html blocks?

I wasn't going to, but I decided to go one step further. The results of the Google Blog search can be output as an RSS feed. I found an ASP script from ByteScout that will display the RSS as HTML and embedded that in a "search results" page. Now I just need to change all of my links to point to the search result page.

The upshot is that the search results as RSS/HTML can be formatted by your standard CSS template so that it looks the same as the rest of your site. Unfortunately, this method will only work if you are doing your own hosting. Although, there might be a way to write this in PHP and include it in your Blogger template.

Yes, the "tags" are in an HTML block (or snippet if you will) that I cut and pasted into the my Blogger settings.

I don't believe Blogger executes any PHP code in Blogger templates, though; you're pretty much limited to javascript, and to get that to work with an RSS feed, the feed needs to be fetched from the same domain as the blog itself.